The total revenue from the sale of petroleum products in Nigeria is expected to fall by N400bn this year on the back of the impact of the COVID-19 pandemic on fuel consumption, a new report by Agusto & Co has said.
According to the credit rating agency’s estimates, the total consumption of white fuels in the country in 2019 stood at 28.1 billion litres, translating to a total revenue of N4.7tn.
“Our research shows that 99 per cent of petroleum products consumed were imported as the country’s refineries operated below the installed capacities, sometimes down for months,” it said in its 2020 Oil and Gas Downstream Report.
Agusto & Co noted that no white fuels were produced at the nation’s refineries for the seven months from June to December 2019 due to ongoing rehabilitation works.
It said the impact of the COVID-19 pandemic on economic activities in the country had resulted in a decline in the consumption of petroleum products.
The rating agency said the lockdown restrictions implemented by the government as part of an effort to curtail the spread of the coronavirus disease affected the consumption of petrol significantly.
It said, “Agusto & Co. expects the consumption of petroleum products, particularly PMS and Aviation Turbine Kerosene, to decline to 27.2 billion litres in 2020 given the severely restricted travel and transportation activities during second and third quarters of the year.
“This is expected to translate to a decline in revenue to N4.3tn in 2020.”
The report revealed that the growth of the Nigerian oil and gas downstream industry remained hindered by the lack of substantial investments, import constraints and regulated pump prices.
It said, “This is largely attributable to the dominance of the government in the industry, particularly in relation to the importation of refined petroleum products.
“Over the years, the industry has enjoyed stable demand of petroleum products as a result of the subsidies provided by the government. This contributed to the gradual crippling of government finances.”
Agusto & Co. noted that the Federal Government had taken positive steps to fully deregulate the industry, highlighting the recent reviews of petrol pump price.
It said, “The consensus medium-term outlook for the crude oil market is positive, which implies that the price of petrol will be higher than the old regulated pump price in the near future.
“The pricing of PMS will continue to be overseen by the Petroleum Products Pricing Regulatory Agency through a pricing template. The new pricing template takes several factors such as the petroleum product cost and the foreign currency conversion rate into consideration.”
The company added that the recent adjustment of the official exchange rate from N306 to N380 per dollar would test the sustainability of the pricing template before the end of 2020.